New land law will reduce house prices by 20%, says government

The Government guarantees that the new land law will reduce the price of new homes in metropolitan areas and district capitals by 20%, setting values ​​below those recorded in Portugal in 2024.

In information sent to Lusa, the Ministry of Territorial Cohesion points out that the “new law sets maximum prices for new homes that are below the average values ​​of real estate transactions recorded in Portugal in 2024”, also using the National Statistics Institute (INE) to state that “the current average price per square meter in new homes is 50% higher than that of used housing”.

“Being able to buy new homes where the maximum price limit is 20% below current market prices not only prevents, but also stops speculation”, says Minister Castro Almeida, quoted in the document.

The Government believes that the law published on 30 December 2024, which will allow local authorities to release rural land for the construction of houses for the middle class at moderate prices, will have a significant anti-speculative effect on the market.

The ministry states that “the average values ​​per square metre of houses sold in the municipalities with the highest demand – Greater Porto, Greater Lisbon and district capitals – are significantly higher than the maximum limit imposed by Decree-Law 117/2024”. “In addition to Lisbon and Cascais, where the difference reaches 45% and 48%, there are important cities such as Sintra (36%), Viana do Castelo (34%), Gaia (32%), Braga (28%), Vila do Conde (27%), Viseu and Setúbal (26%), Barreiro (24%), Oeiras (23%), Aveiro (23%) or Coimbra (21%), where the limit imposed by the new law is considerably below the prices currently practiced on the market”, continues the information sent to Lusa.

Referring to the figures again, the Government cites the “most recent data from the Consumer Price Index (CPI) of the National Institute of Statistics” to point out that “in the third quarter of 2024 the average value per square meter of new housing was 50% higher than the average sale value of used housing – and all the houses that will be built on rural land that the local authorities transform into construction areas will be completely new”.

Minister Castro Almeida argues that “the virtues of the law are not limited to combating speculation (…), preventing the construction of buildings in the middle of rural areas” and assures that “the transfer of rural land to urban land is impossible whenever floodplains, flood-prone areas, land defined as suitable for agriculture by the National Agricultural Reserve or areas classified as the Natura 2000 Network are involved”.

“To solve all the housing problems in the country, much less than 1% of all available rural land will be needed”, assures the minister, for whom “the exemption from bureaucracy and central approval will not make the decisions of local authorities less transparent: not only do the municipal executives include opposition councillors, but the municipal assemblies also include representatives of the main parties and all the parish council presidents”.

Emphasizing that the new law will allow “local authorities to release land for the construction of housing for the middle class throughout the country”, it recalls that “the land will have to be compatible with the existing urban area, and at least 70% of its area must be occupied by residential buildings”, the document continues.

The ministry concludes that the decision to release land for residential use “is solely dependent on the municipal councils and municipal assemblies – it will not have to go to any other authority”.

“The measure is included in the ‘Build Portugal’ plan and allows, on an exceptional basis, the creation of construction areas on land compatible with the existing urban area”, the document points out. For Castro Almeida, “this is a good way to increase housing construction, ensuring prices within the reach of the middle class without dissuading real estate companies from investing”, once again referring to the INE to recall that “in 2002, 125 thousand homes were built, contrasting with only 22 thousand homes in 2022”.

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Source: Lusa / Idealista